[Federal Register Volume 76, Number 243 (Monday, December 19, 2011)]
[Rules and Regulations]
[Pages 78553-78566]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-32263]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9567]
RIN 1545-BK17
Reporting of Specified Foreign Financial Assets
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Temporary regulations.
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SUMMARY: This document contains temporary regulations relating to the
provisions of the Hiring Incentives to Restore Employment (HIRE) Act
that require foreign financial assets to be reported to the Internal
Revenue Service for taxable years beginning after March 18, 2010. In
particular, the temporary regulations provide guidance relating to the
requirement that individuals attach a statement to their income tax
return to provide required information regarding foreign financial
assets in which they have an interest. The temporary regulations affect
individuals required to file Form 1040, ``U.S. Individual Income Tax
Return,'' and certain individuals required to file Form 1040-NR,
``Nonresident Alien Income Tax Return.'' The text of these temporary
regulations also serves as the text of proposed regulations contained
in a cross-reference notice of proposed rulemaking (REG-130302-10)
published in the Proposed Rules section in this issue of the Federal
Register.
DATES: Effective Date: These regulations are effective on December 19,
2011.
Applicability Dates: For dates of applicability, see Sec. Sec.
1.6038D-1T(b), 1.6038D-2T(e), 1.6038D-3T(e), 1.6038D-4T(b), 1.6038D-
5T(g), 1.6038D-7T(d), and 1.6038D-8T(g).
FOR FURTHER INFORMATION CONTACT: Joseph S. Henderson, (202) 622-3880
(not a toll-free call).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
These temporary regulations are being issued without prior notice
and public comment pursuant to the Administrative Procedure Act (5
U.S.C. 553). For this reason, the collection of information contained
in these regulations has been reviewed and pending receipt and
evaluation of public comments, approved by the Office of Management and
Budget under Control Number 1545-2195. Responses to this collection of
information are mandatory.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless the collection of
information displays a valid control number. The collection of
information contained in these regulations is satisfied by filing Form
8938, ``Statement of Specified Foreign Financial Assets,'' OMB No.
1545-2195, with the respondent's income tax return.
For further information concerning this collection of information,
and where to submit comments on the collection of information and the
accuracy of the estimated burden, and suggestions for reducing this
burden, please refer to the preamble to the cross-referencing notice of
proposed rulemaking published in the Proposed Rules section of this
issue of the Federal Register.
Books and records relating to a collection of information must be
retained as long as their contents may become material in the
administration of any internal revenue law. Generally, tax returns and
tax return information are confidential, as required by 26 U.S.C. 6103.
Background
This document contains amendments to the Income Tax Regulations (26
CFR part 1) for reporting specified foreign financial assets under
section 6038D of the Internal Revenue Code (Code).
Section 6038D was enacted by section 511 of the HIRE Act. Section
6038D(a) requires an individual who holds any interest in a specified
foreign financial asset during the taxable year to attach a statement
to that individual's return of tax imposed by subtitle A of the Code to
report the information identified in section 6038D(c), if the aggregate
value of the specified foreign financial assets in which the individual
holds an interest exceeds $50,000 for the taxable year, or such higher
dollar amount as the Secretary may prescribe.
Section 6038D(b) defines specified foreign financial assets. For
purposes of section 6038D, a specified foreign financial asset is any
financial account maintained by a foreign financial institution and, to
the extent not held in an account at a financial institution: (i) Any
stock or security issued by any person other than a United States
person; (ii) any financial instrument or contract held for investment
that has an issuer or counterparty that is not a United States person;
and (iii) any interest in a foreign entity.
Section 6038D(c) sets forth the information an individual must
include on the statement reporting specified foreign financial assets.
For a financial account, the name and address of the financial
institution in which the account is maintained must be reported, as
well as the account number. For any stock or security, the name and
address of the non-U.S. issuer, as well as information necessary to
identify the class or issue of which the stock or security is a part,
must be reported. In the case of any other instrument, contract, or
interest, the names and addresses of all issuers and counterparties
must be reported, together with the information necessary to identify
the instrument, contract, or interest. The maximum value of each
specified foreign financial asset during the taxable year also must be
reported.
An individual who fails to disclose the information required to be
reported
[[Page 78554]]
by section 6038D(c) is subject to a $10,000 penalty under section
6038D(d)(1). Section 6038D(d)(2) provides that if the failure to comply
continues for more than 90 days after the day on which the Secretary
mails notice of the failure to the individual, the individual must pay
an additional penalty of $10,000 for each 30-day period (or fraction
thereof) during which the failure to disclose continues after the
expiration of the 90-day period. This continuation penalty is not to
exceed $50,000 with respect to any such failure.
Under section 6038D(e), the aggregate value of any specified
foreign financial assets in which an individual has an interest is
presumed to exceed the reporting thresholds set forth in section
6038D(a) if the Secretary determines that the individual has an
interest in one or more specified foreign financial assets and has not
provided sufficient information to demonstrate the aggregate value of
the assets. This presumption applies for purposes of assessing the
penalties imposed under section 6038D.
Section 6038D(f) authorizes the Secretary to issue regulations or
other guidance applying the provisions of section 6038D to any domestic
entity as if the domestic entity were an individual, if the domestic
entity is formed or availed of for the purposes of holding, directly or
indirectly, specified foreign financial assets.
Section 6038D(g) provides that no penalty will be imposed by
section 6038D for any failure to report that is shown to be due to
reasonable cause and not due to willful neglect. A foreign law
restriction, whether civil or criminal, on disclosing the information
required to be reported is not reasonable cause.
Section 6038D(h) authorizes the Secretary to issue regulations or
other guidance as may be necessary or appropriate to carry out the
purposes of section 6038D. This guidance may include appropriate
exceptions from reporting for nonresident aliens, bona fide residents
of U.S. possessions, and classes of assets identified by the Secretary,
such as assets subject to duplicative reporting requirements. The term
``U.S. possession'' means American Samoa, Guam, the Northern Mariana
Islands, Puerto Rico, or the U.S. Virgin Islands, each of which is
generally referred to as a U.S. territory in this explanation.
Section 6038D is effective for taxable years beginning after March
18, 2010 (the date of enactment of the HIRE Act). Notice 2011-55, 2011-
29 IRB 53 (July 18, 2011), provides that an individual that has a
taxable year that begins after March 18, 2010, and is required to
attach a statement of specified foreign financial assets to an annual
return to be filed prior to the issuance of Form 8938, ``Statement of
Specified Foreign Financial Assets,'' is to satisfy his or her
obligation under section 6038D for such taxable year by attaching Form
8938 for such taxable year to his or her next annual return required to
be filed after the issuance of Form 8938. See Sec.
601.601(d)(2)(ii)(b) of this chapter.
Explanation of Provisions
1. Requirement To Report Specified Foreign Financial Assets
Section 1.6038D-1T sets forth the definitions of certain terms for
purposes of section 6038D and the regulations. Section 1.6038D-2T
provides rules for determining if a specified individual (as defined in
Sec. 1.6038D-1T(a)(2)) or a specified domestic entity (collectively
referred to as a specified person) must file a Form 8938 with the
specified person's annual return (as defined in Sec. 1.6038D-
1T(a)(11)).
For purposes of section 6038D, a specified person's annual return
includes an annual federal income tax return of a specified individual
or an annual federal income tax return or information return of a
specified domestic entity filed with the Internal Revenue Service under
section 876, 6011, 6012, 6013, 6031, or 6037, and the regulations . For
example, a partnership that is a specified domestic entity is required
to attach Form 8938 to its Form 1065, ``U.S. Return of Partnership
Income,'' for the taxable year.
A specified person must file Form 8938 if the person has an
interest in one or more specified foreign financial assets and those
assets have an aggregate fair market value exceeding either $50,000 on
the last day of the taxable year or $75,000 at any time during the
taxable year. Married specified individuals filing a joint annual
return are not required to file Form 8938 unless the aggregate value of
all of the specified foreign financial assets in which either spouse
has an interest exceeds $100,000 on the last day of the taxable year or
$150,000 at any time during the taxable year.
An individual residing outside the United States can reasonably be
expected to have a greater amount of specified foreign financial assets
for reasons unrelated to the policies underlying section 6038D.
Accordingly, the regulations increase the reporting threshold of
section 6038D(a) in the case of a specified individual who is a
qualified individual under section 911(d)(1). The regulations provide
that such a specified individual is not required to file Form 8938
unless the aggregate value of the specified foreign financial assets in
which the specified individual has an interest exceeds $200,000 on the
last day of the taxable year or $300,000 at any time during the taxable
year. If married specified individuals file a joint annual return and
either spouse is a qualified individual under section 911(d)(1), the
regulations provide that they are not required to file Form 8938 unless
the aggregate value of all of the specified foreign financial assets in
which either spouse has an interest exceeds $400,000 on the last day of
the taxable year or $600,000 at any time during the taxable year.
As discussed in section 6 of this explanation, certain specified
foreign financial assets are excepted from the reporting obligations
imposed under section 6038D. Assets reported by a specified person on
certain other forms timely filed with the Internal Revenue Service are
not required to be separately identified on Form 8938, but if a
specified person is required to file Form 8938, the number of such
other forms filed with the Internal Revenue Service must be reported on
Form 8938. In addition, the value of specified foreign financial assets
that qualify for this exception is included for purposes of determining
whether the aggregate value of specified foreign financial assets in
which a specified individual has an interest exceeds the applicable
reporting threshold.
Another category of assets excepted from reporting are assets
considered owned by a specified person that is treated as the owner of
certain trusts. Additionally, certain assets held by a specified
individual who is a bona fide resident of a U.S. territory are also
excepted from reporting. Specified foreign financial assets that
qualify for either of these two exceptions are not included for
purposes of determining whether the aggregate value of specified
foreign financial assets in which a specified person has an interest
exceeds the applicable reporting threshold.
The Form 8938 reporting period is the taxable year for a specified
individual who is a U.S. citizen, a resident alien, or a bona fide
resident of a U.S. territory for the entire taxable year. The Form 8938
reporting period for a specified domestic entity is the entity's
taxable year. The Form 8938 reporting period for a specified individual
who is a U.S. citizen or resident alien for less than the entire
taxable year is the portion of the taxable year for which the specified
individual is a U.S. citizen or resident
[[Page 78555]]
alien. The Form 8938 reporting period for a specified individual who is
bona fide resident of Puerto Rico for less than the entire taxable year
under Sec. 1.937-1(f)(2)(ii) is the portion of the taxable year for
which the specified individual is a U.S. citizen.
A specified person is not required to file Form 8938 for any
taxable year for which the specified person is not required to file an
annual return (for example, a Form 1040, ``U.S. Individual Income Tax
Return,'' Form 1041, ``U.S. Income Tax Return for Estates and Trusts,''
Form 1120, ``U.S. Corporation Income Tax Return,'' Form 1120-S, ``U.S.
Income Tax Return for an S Corporation,'' or Form 1065, ``U.S. Return
of Partnership Income'') with the Internal Revenue Service.
If a specified domestic entity is a member of an affiliated group
of corporations that files a consolidated return, the Form 8938 of the
specified domestic entity must be filed with the consolidated federal
income tax return of the affiliated group.
A. Individuals Required To File Form 8938, ``Statement of Specified
Foreign Financial Assets''
For section 6038D purposes, a specified individual is a U.S.
citizen, a resident alien of the United States (as determined under
section 7701(b) and Sec. Sec. 301.7701(b)-1 through 301.7701(b)-9 of
this chapter), or a nonresident alien who has elected under section
6013(g) or (h) to be taxed as a U.S. resident. A resident alien who
elects to be taxed as a resident of a foreign country pursuant to a
U.S. income tax treaty's residency tie-breaker rules is a specified
individual for purposes of section 6038D and the regulations.
In addition, certain nonresident aliens who are treated as
residents under other sections of the Code are specified individuals
for the purposes of section 6038D and the regulations . Under section
876 and Sec. 1.876-1, nonresident alien individuals of the United
States under section 7701(b) who are bona fide residents of Puerto Rico
or a section 931 possession (as defined in Sec. 1.931-1(c)(1)) are
subject to tax under sections 1 and 55 in generally the same manner as
a U.S. resident. Therefore, the rules under section 6038D apply to a
nonresident alien who is a bona fide resident of Puerto Rico or
American Samoa in the same manner as they apply to a U.S. citizen or
resident.
As noted in this preamble, a specified person is not required to
file Form 8938 if the specified person is not required to file an
annual return with the Internal Revenue Service. With respect to bona
fide residents of U.S. territories, this rule means that a bona fide
resident of a U.S. territory has a filing requirement under section
6038D and the regulations only if he or she is required to file a
federal income tax return for the taxable year. In general, bona fide
residents of the U.S. Virgin Islands and U.S. territories to which
section 935 applies (currently, Guam and the Northern Mariana Islands)
are not required to file a federal income tax return provided they
correctly report and pay tax on their worldwide income to their U.S.
territory taxing authority. Bona fide residents of Puerto Rico or a
section 931 possession (currently, American Samoa) generally are
required to file a federal income tax return with the Internal Revenue
Service only if they have income from sources without the relevant U.S.
territory, because sections 931(a) and 933 generally exclude from gross
income any income derived from sources within the relevant U.S.
territory. Section 6038D and these regulations generally require only
bona fide residents of Puerto Rico or a section 931 possession that are
required to file a federal income tax return with the Internal Revenue
Service to file a Form 8938 with the Internal Revenue Service.
B. Interest in a Specified Foreign Financial Asset
For section 6038D purposes, a specified person is generally
considered to have an interest in a specified foreign financial asset
if any income, gains, losses, deductions, credits, gross proceeds, or
distributions attributable to the holding or disposition of the asset
are or would be required to be reported, included, or otherwise
reflected on the specified person's annual return filed with the
Internal Revenue Service (even if no income, gains, losses, deductions,
credits, gross proceeds, or distributions are attributable to the asset
for a particular taxable year).
For purposes of section 6038D and the regulations, a parent that
makes an election under section 1(g)(7) to include certain unearned
income of a child in the parent's gross income required to be reported
for the taxable year has an interest in any specified foreign financial
asset held by the child.
A specified person that is the owner of an entity disregarded as an
entity separate from its owner (as provided in Sec. 301.7701-
2(c)(2)(i) of this chapter) (disregarded entity) is treated as having
an interest in any specified foreign financial assets held by the
disregarded entity. A specified person that is treated as the owner of
a trust or any portion of a trust under sections 671 through 679 is
treated as having an interest in any specified foreign financial assets
held by the trust or by the portion of the trust that the specified
person owns, except as described in section 6(B) of this explanation. A
specified person is not treated as having an interest in any specified
foreign financial assets held by a partnership, corporation, trust
(except as described in this explanation), or estate solely as a result
of the specified person's status as a partner, shareholder, or
beneficiary.
C. Jointly Owned Assets
A joint interest in a specified foreign financial asset is subject
to reporting under section 6038D and Sec. 1.6038D-2T(a) by each
specified person that is a joint owner of the asset. In general, each
joint owner includes the full value of the jointly owned asset for
purposes of determining whether the aggregate value of all specified
foreign financial assets in which the joint owner has an interest
exceeds the reporting thresholds set forth in Sec. 1.6038D-2T(a).
1. Married individuals filing jointly.
Married specified individuals who file a joint annual return for
the taxable year must fulfill their reporting requirements under
section 6038D and Sec. 1.6038D-2T(a) by filing a single Form 8938 that
reports all of the specified foreign financial assets in which either
married specified individual has an interest. A specified foreign
financial asset that is jointly owned by married specified individuals
or a specified foreign financial asset held by a child for which the
married specified individuals have made an election under section
1(g)(7) is reported once on the single Form 8938. Married specified
individuals who file a joint annual return include the value of a
specified foreign financial asset that they jointly own together or a
specified foreign financial asset held by a child for which they have
made an election under section 1(g)(7) only once in determining whether
the aggregate value of all of the specified foreign financial assets in
which either married specified individual has an interest exceeds the
appropriate reporting threshold set forth in Sec. 1.6038D-2T(a).
2. Married individuals filing separately.
A married specified individual who files a separate annual return
for the taxable year must fulfill the reporting requirements under
section 6038D and Sec. 1.6038D-2T(a) by filing a separate Form 8938
that reports all of the specified foreign financial assets in which the
married specified individual has an interest, including assets jointly
owned with the married specified individual's spouse. A married
specified individual that files a separate annual
[[Page 78556]]
return and whose spouse is a specified person includes only one-half of
the value of a specified foreign financial asset that the married
specified individual jointly owns with his or her spouse in determining
whether the married specified individual has an interest in specified
foreign financial assets the aggregate value of which exceeds the
appropriate reporting threshold set forth in Sec. 1.6038D-2T(a).
2. Specified Foreign Financial Assets
For purposes of section 6038D, specified foreign financial assets
include financial accounts maintained by foreign financial
institutions, as well as certain other foreign financial assets or
instruments. An asset or instrument may be a specified foreign
financial asset subject to reporting under section 6038D and the
regulations even if the asset or instrument does not have a positive
value.
A. Financial Account Maintained by a Foreign Financial Institution
For purposes of section 6038D, a financial account is defined by
reference to section 1471(d)(2) and the regulations.
A foreign financial institution is defined by reference to section
1471(d)(4). For this purpose, a foreign financial institution is a
financial institution (as determined under section 1471(d)(5)) that is
a foreign entity (as determined under section 1473(5)). Under section
1471(d)(5), a financial institution is any entity that--
(1) Accepts deposits in the ordinary course of a banking or similar
business;
(2) Holds financial assets for the account of others as a
substantial portion of its business; or
(3) Is engaged, or holds itself out as being engaged, primarily in
the business of investing, reinvesting, or trading in securities (as
defined in section 475(c)(2) without regard to the last sentence
thereof), partnership interests, commodities (as defined in section
475(e)(2)), or any interest (including a futures or forward contract or
option) in such securities, partnership interests, or commodities.
Notwithstanding that a financial institution organized under the
laws of a U.S. territory is not generally a foreign financial
institution for purposes of section 1471(d)(4), for purposes of section
6038D and the regulations, a specified foreign financial asset includes
a financial account maintained by a financial institution organized
under the laws of a U.S. territory. Accordingly, such an account must
be reported, except when owned by a bona fide resident of the relevant
U.S. territory.
A financial account maintained by a U.S. payor as defined in Sec.
1.6049-5(c)(5)(i) (including assets held in such an account) is not a
specified foreign financial asset for purposes of section 6038D and the
regulations thereunder. For example, a specified person is not required
to report a financial account maintained by a U.S. branch of a foreign
financial institution described in Sec. 1.1441-1(b)(2)(iv).
An asset held in a financial account maintained by a foreign
financial institution is not required to be reported on Form 8938
separately from the reported financial account in which the asset is
held. The value of an asset held in a financial account maintained by a
foreign financial institution is included in determining the maximum
value of that account.
B. Other Specified Foreign Financial Assets
Under Sec. 1.6038D-3T(b), specified foreign financial assets also
include certain assets that are held outside of a financial account
maintained by a financial institution. Specifically, a specified
foreign financial asset includes any asset that is held for investment
and is described in one or more of the following three categories:
Stock or securities issued by a person other than a U.S. person; a
financial instrument or contract issued by a person other than a U.S.
person or that has a counterparty that is a person other than a U.S.
person; and any interest in a foreign entity. For these purposes, a
U.S. person is defined under section 7701(a)(30). Whether an entity is
a foreign entity is determined under section 1473(5). These three
categories are broad and overlap in certain cases such that an asset
not held in a financial account may be within more than one of the
statutory categories of section 6038D(b)(2). For example, stock issued
by a foreign corporation is stock that is issued by a person other than
a U.S. person, and is also an interest in a foreign entity.
An asset not held in an account maintained by a financial
institution is held for investment for purposes of section 6038D and
the regulations if the asset is not used or held for use in the
specified person's trade or business. For purposes of determining
whether an asset is used or held for use in the specified person's
trade or business, the regulations apply principles based on the asset-
use test of Sec. 1.864-4(c)(2), with certain modifications. The
regulations provide that stock is never considered to be used or held
for use in a trade or business in applying the trade or business
exception. The Department of the Treasury and the Internal Revenue
Service believe this rule is appropriate given the broad exception for
section 475 mark-to-market accounting discussed in section 2(D) of this
explanation, and the exception from reporting for stock held in a
financial account maintained by a foreign financial institution
(provided the financial account is reported on Form 8938). The
Department of the Treasury and the Internal Revenue Service request
comments that concern the treatment of stock under these regulations
and, more generally, what refinements, if any, to the regulation's
trade or business standard would facilitate the implementation of the
trade or business reporting exception.
C. Special Rule for Foreign Estates and Foreign Trusts
A beneficial interest in a foreign trust or a foreign estate is not
a specified foreign financial asset of a specified person unless the
specified person knows or has reason to know based on readily
accessible information of the interest. Receipt of a distribution from
the foreign trust or foreign estate is deemed for this purpose to be
actual knowledge of the interest.
D. Assets Not Subject to Reporting Under Section 6038D
The following assets are not specified foreign financial assets--
(1) An asset for which a specified person uses mark-to-market
accounting under section 475;
(2) A financial account maintained by a foreign financial
institution for which the specified person uses mark-to-market
accounting under section 475 for all of the holdings in the account;
and
(3) An interest in a social security, social insurance, or other
similar program of a foreign government.
3. Required Information
A specified person required to report on Form 8938 must provide the
following information with regard to each specified foreign financial
asset:
(A) In the case of a financial account maintained by a foreign
financial institution, the name and address of the foreign financial
institution and the account number of the account;
(B) In the case of stock or a security, the name and address of the
issuer, and information that identifies the class or issue of which the
stock or security is a part;
(C) In the case of a financial instrument or contract held for
investment, information that identifies
[[Page 78557]]
the financial instrument or contract, including the names and addresses
of all issuers and counterparties;
(D) In the case of an interest in a foreign entity, information
that identifies the interest, including the name and address of the
entity;
(E) The maximum value of the specified foreign financial asset
during the portion of the taxable year in which the specified person
has an interest in the asset;
(F) In the case of a financial account that is a depository or
custodial account under section 1471(d)(2), whether such financial
account was opened or closed during the taxable year;
(G) The date, if any, on which the specified foreign financial
asset, other than a financial account that is a depository or custodial
account under section 1471(d)(2), was either acquired or disposed of
(or both) during the taxable year;
(H) The amount of any income, gain, loss, deduction, or credit
recognized for the taxable year with respect to the reported specified
foreign financial asset, and the schedule, form, or return filed with
the Internal Revenue Service on which the income, gain, loss,
deduction, or credit, if any, is reported or included by the specified
person;
(I) The foreign currency exchange rate and, if the source of such
rate is other than as described in Sec. 1.6038D-5T(d)(1), the source
of the rate used to determine the specified foreign financial asset's
U.S. dollar value, including maximum value; and
(J) For a specified foreign financial asset excepted from reporting
on Form 8938 under Sec. 1.6038D-7T(a), the specified person must
report the number of each type of form on which the asset is reported
directly (for example, Form 3520, ``Annual Return To Report
Transactions With Foreign Trusts and Receipt of Certain Foreign
Gifts,'' Form 3520-A, ``Annual Information Return of Foreign Trust With
a U.S. Owner,'' Form 5471, ``Information Return of U.S. Persons With
Respect To Certain Foreign Corporations,'' Form 8621, ``Return by a
Shareholder of a Passive Foreign Investment Company or a Qualified
Electing Fund,'' Form 8865, ``Return of U.S. Persons With Respect To
Certain Foreign Partnerships,'' or Form 8891, ``U.S. Information Return
for Beneficiaries of Certain Canadian Registered Retirement Plans.'')
4. Valuation Guidelines
The value of a specified foreign financial asset must be determined
both for purposes of determining if the aggregate value of the
specified foreign financial assets in which a specified person holds an
interest exceeds the reporting thresholds set forth in Sec. 1.6038D-
2T(a) and for purposes of reporting the maximum value of a specified
foreign financial asset on Form 8938 as required by Sec. 1.6038D-
4T(a)(5). Under Sec. 1.6038D-5T, the value of a specified foreign
financial asset for both of these purposes generally is the asset's
fair market value. The maximum value of a specified foreign financial
asset is the asset's highest fair market value during the taxable year,
except as otherwise provided in Sec. 1.6038D-5T, and must be reported
on Form 8938 in U.S. dollars. If the maximum value of a specified
foreign financial asset is less than zero, the value of the specified
foreign financial asset is treated as zero for the purposes of
determining the aggregate value of specified foreign financial assets
in which a specified person has an interest and determining the maximum
value of a specified foreign financial asset required to be reported on
Form 8938.
A. Foreign Currency Conversion
If a specified foreign financial asset is denominated in a foreign
currency, the value of the asset for purposes of determining both the
aggregate value of specified foreign financial assets in which a
specified person holds an interest and the maximum value of the
specified foreign financial asset is first determined in the foreign
currency prior to conversion into U.S. dollars (that is, independently
of exchange rate fluctuations during the year). The asset's foreign
currency value is then converted into U.S. dollars at the taxable year-
end spot rate for converting the foreign currency into U.S. dollars
(that is, the rate to purchase U.S. dollars). The U.S. Treasury
Department's Financial Management Service foreign currency exchange
rate is to be used to convert the value of a specified foreign
financial asset into U.S. dollars. If no U.S. Treasury Department
Financial Management Service foreign currency exchange rate is
available, another publicly available foreign currency exchange rate
may be used to determine an asset's maximum value, but the use of such
rate must be disclosed on Form 8938.
B. Valuing Financial Accounts
The maximum value of a financial account means a reasonable
estimate of the maximum value of the holdings of the financial account
at any time during the taxable year. Periodic account statements
provided at least annually may be relied upon for reporting a financial
account's maximum value absent actual knowledge or reason to know based
on readily accessible information that the statements do not reflect a
reasonable estimate of the maximum account value during the taxable
year.
C. Valuing Other Specified Foreign Financial Assets
Except as described in sections 5(D) and 5(E) of this explanation,
for purposes of determining the maximum value of a specified foreign
financial asset other than a financial account maintained with a
foreign financial institution, a specified person may treat the asset's
fair market value on the last day during the taxable year on which the
specified person has an interest in the asset as the maximum value of
the asset. The specified person may not use this valuation approach if
the specified person has actual knowledge or reason to know based on
readily accessible information that the fair market value determined as
of such date does not reflect a reasonable estimate of the maximum
value of the asset during the year (for example, because there is a
reason to know that the asset's value declined significantly during the
year).
A specified person may determine the fair market value of a
specified foreign financial asset based on information publicly
available from reliable financial information sources or from other
verifiable sources. Even if there is no information from reliable
financial information sources regarding the fair market value of a
reported asset, the regulations do not require a specified person to
obtain an appraisal by a third party in order to reasonably estimate
the asset's fair market value.
D. Special Valuation Rules for Interests in Foreign Trusts
If a specified person is a beneficiary of a foreign trust, the
maximum value of the specified person's interest in the trust is the
sum of the fair market value, determined as of the last day of the
taxable year, of all of the currency or other property distributed from
the foreign trust during the taxable year to the specified person, plus
the value as of the last day of the taxable year of the specified
person's right as a beneficiary to receive mandatory distributions from
the foreign trust as determined under section 7520.
For purposes of determining the aggregate value of specified
foreign financial assets in which a specified person has an interest,
if the specified person does not know or have reason to know based on
readily accessible information the fair market value of the person's
interest in a foreign trust
[[Page 78558]]
during the taxable year, the value to be included in determining the
aggregate value of the specified foreign financial assets is the
maximum value of the specified person's interest in the foreign trust.
E. Special Valuation Rule for Interests in Foreign Estates, Pension
Plans, and Deferred Compensation Plans
The maximum value of a specified person's interest in a foreign
estate, foreign pension plan, or a foreign deferred compensation plan
is the fair market value, determined as of the last day of the taxable
year, of the specified person's beneficial interest in the assets of
the foreign estate, foreign pension plan, or foreign deferred
compensation plan. If the specified person does not know or have reason
to know based on readily accessible information such fair market value,
the maximum value to be reported is the fair market value, determined
as of the last day of the taxable year, of the currency and other
property distributed during the taxable year to the specified person as
a beneficiary or participant.
For purposes of determining the aggregate value of specified
foreign financial assets in which a specified person has an interest,
if the specified person does not know or have reason to know based on
readily accessible information the fair market value of the person's
interest in a foreign estate, foreign pension plan, or foreign deferred
compensation plan during the taxable year, the value to be included in
determining the aggregate value of the specified foreign financial
assets is the fair market value, determined as of the last day of the
taxable year, of the currency and other property distributed during the
taxable year to the specified person as a beneficiary or participant.
F. Jointly Owned Assets
Except for certain married specified individuals who jointly own a
specified foreign financial asset with a spouse, a specified person
that jointly owns a specified foreign financial asset must use the
value of the entire asset, and not the value of the specified person's
separate interest, for purposes of determining whether the reporting
thresholds set forth in Sec. 1.6038D-2T(a) are exceeded. A specified
person, including a married specified individual, that jointly owns a
specified foreign financial asset must report the maximum value of the
entire asset during the portion of the taxable year that the specified
person has an interest in the asset. Married specified individuals that
jointly own a specified foreign financial asset and that file a joint
annual income return tax are only required to report the asset once on
the single Form 8938 filed with their return.
5. Application to Entities Formed or Availed of for Purposes of
Holding, Directly or Indirectly, Specified Foreign Financial Assets
The notice of proposed rulemaking accompanying these regulations
(REG-130302-10) includes Prop. Reg. Sec. 1.6038D-6, which applies
section 6038D to certain domestic entities that are formed or availed
of for purposes of holding, directly or indirectly, specified foreign
financial assets. The Department of the Treasury and the Internal
Revenue Service anticipate that Prop. Reg. Sec. 1.6038D-6 will be
issued as a final regulation during 2012 and will apply to taxable
years beginning after December 31, 2011. Until Prop. Reg. Sec.
1.6038D-6 is issued as a final regulation, no domestic entity is
required to file Form 8938 to report specified foreign financial assets
with its annual return.
6. Exceptions From the Application of Section 6038D
A. Duplicative Reporting of Assets
A specified person required to file Form 8938 with the Internal
Revenue Service is not required to report a specified foreign financial
asset on Form 8938 if the asset is reported or reflected on a Form 3520
(in the case of a specified person who is the beneficiary of a foreign
trust), Form 5471, Form 8621, Form 8865, or Form 8891 timely filed with
the Internal Revenue Service by the specified person for the taxable
year, and the Form 8938 indicates the filing of the form on which the
asset is reported.
A specified person required to file Form 8938 that is treated as an
owner of a foreign trust or any portion of such a trust under sections
671 through 679 is not required to report any specified foreign
financial asset held by the trust on Form 8938 provided the specified
person reports the trust on a Form 3520 timely filed with the Internal
Revenue Service for the taxable year, the trust timely files Form 3520-
A with the Internal Revenue Service for the taxable year, and the Form
8938 filed by the specified person for the taxable year indicates the
filing of the Form 3520 and the Form 3520-A.
B. Owner of Certain Trusts
A specified person that is treated as an owner of a domestic
liquidating trust described in Sec. 301.7701-4(d) of this chapter
created pursuant to a court order issued in a bankruptcy under Chapter
7 (11 U.S.C. 701 et seq.) or a confirmed plan under Chapter 11 (11
U.S.C. 1101 et seq.) of the Bankruptcy Code, a domestic widely held
fixed investment trust under Sec. 1.671-5, or any portion of such a
trust under sections 671 through 679 is not required to file Form 8938
to report any specified foreign financial asset held by the trust.
C. Certain Specified Foreign Financial Assets Held by a Bona Fide
Resident of a U.S. Territory
As described in section 1(A) of this explanation, bona fide
residents of the U.S. Virgin Islands and U.S. territories to which
section 935 applies (currently, Guam and the Northern Mariana Islands)
generally are not required to file a federal income tax return and,
therefore, generally would not be required to file a Form 8938 with the
Internal Revenue Service. By contrast, certain bona fide residents of
Puerto Rico or a section 931 possession as defined in Sec. 1.931-
1(c)(1) (currently, American Samoa) who have income from sources
outside their U.S. territory of residence may be required to file a
federal income tax return; thus, the reporting requirements of section
6038D and the regulations may apply to such persons.
No reporting is required by a bona fide resident of a U.S.
territory with respect to certain specified foreign financial assets
that have certain connections to the U.S. territory of which the
individual is a bona fide resident. Reporting is not required with
respect to a financial account maintained by a financial institution
organized under the laws of the U.S. territory of which the specified
person is a bona fide resident. Reporting also is not required with
respect to a financial account maintained by a branch of a financial
institution not organized under the laws of the U.S. territory of which
the specified person is a bona fide resident, if the branch is subject
to the same income tax and information reporting requirements
applicable to a financial institution organized under the laws of the
U.S. territory.
Reporting is also not required with respect to stock or securities
or any other interest in an entity organized under the laws of the U.S.
territory of which the specified person is a bona fide resident.
Similarly, reporting is not required with respect to a financial
instrument or contract held for investment if the issuer or
counterparty is: (i) An entity organized under the laws of the U.S.
territory of which the specified person is a bona fide resident; or
(ii) a bona fide resident of the U.S.
[[Page 78559]]
territory of which the specified person is a bona fide resident.
These reporting exceptions for certain U.S. territory-connected
assets do not apply to assets held by a U.S. citizen or resident who is
not a bona fide resident of any U.S. territory or an individual who is
a bona fide resident of a U.S. territory other than the one to which
the assets are connected.
D. Form TD F 90-22.1, ``Report of Foreign Bank and Financial Accounts''
(FBAR)
Reporting on Form TD F 90-22.1 is required under Title 31 (31
U.S.C. 5314) for other law enforcement purposes in addition to tax
administration. As a consequence, different policy considerations apply
to Form 8938 and FBAR reporting. These are reflected in the different
categories of persons required to file Form 8938 and the FBAR, the
different filing thresholds for Form 8938 and FBAR reporting, and the
different assets (and accompanying information) required to be reported
on each form. Although certain information may be reported on both Form
8938 and the FBAR, the information required by the forms is not
identical in all cases, and reflects the different rules, key
definitions (for example, ``financial account''), and reporting
requirements applicable to Form 8938 and FBAR reporting.
These differing policy considerations were recognized during the
passage of the HIRE Act and the enactment of section 6038D, and the
intention to retain FBAR reporting notwithstanding the enactment of
section 6038D was specifically noted in the Technical Explanation Of
The Revenue Provisions Contained In Senate Amendment 3310, The ``Hiring
Incentives To Restore Employment Act,'' Under Consideration by the
Senate (Staff of the Joint Comm. on Taxation, JCX-4-10 (February 23,
2010)) (Technical Explanation) accompanying the HIRE Act. The Technical
Explanation states that ``[n]othing in this provision [section 511 of
the HIRE Act enacting section 6038D] is intended as a substitute for
compliance with the FBAR reporting requirements, which are unchanged by
this provision.'' (Technical Explanation at p. 60). Against this
background, reporting on Form 8938 and the FBAR is not duplicative and
both forms must be filed, if required.
7. Penalties for Failure To Disclose
A. In General
If a specified person fails to file a Form 8938 that includes the
information required by section 6038D(c) and Sec. 1.6038D-4T with
respect to any taxable year at the time and in the manner described in
section 6038D(a) and Sec. 1.6038D-2T, a penalty of $10,000 will apply
to that specified person under section 6038D(d) and Sec. 1.6038D-8T.
If any such failure continues for more than 90 days after the day on
which the Commissioner or his delegate mails a notice of the failure to
the specified person required to file the Form 8938, the specified
person is subject to an additional penalty of $10,000 for each 30-day
period (or fraction thereof) during which the failure continues after
the 90-day period has expired. The additional (or continuation) penalty
is limited to a maximum of $50,000 for each such failure.
Married specified individuals who file a joint annual return and
fail to file a required Form 8938, ``Statement of Specified Foreign
Financial Assets,'' that includes the information required by section
6038D(c) and Sec. 1.6038D-4T with respect to any taxable year at the
time and in the manner described in section 6038D(a) and Sec. 1.6038D-
2T are subject to penalties under section 6038D(d) and Sec. 1.6038D-8T
as if the married specified individuals are a single specified person.
The liability of married specified individuals who file a joint annual
return with respect to penalties under this section is joint and
several.
B. Presumption of Aggregate Value
For the purpose of assessing the penalties for failure to disclose,
if the Commissioner or his delegate determines that a specified person
has an interest in one or more specified foreign financial assets, and
the specified person has not provided sufficient information to
demonstrate the aggregate value of the assets upon request by the
Secretary, then the aggregate value of the assets is treated as being
in excess of the applicable reporting threshold set forth in Sec.
1.6038D-2T(a).
C. Reasonable Cause Exception
If a specified person shows that the failure to report the
information required under section 6038D and Sec. 1.6038D-4T is due to
reasonable cause and not due to willful neglect, no penalty will be
imposed under section 6038D(d) or Sec. 1.6038D-8T. To show that the
failure to report is due to reasonable cause and not due to willful
neglect, the specified person must make an affirmative showing of all
the facts alleged as reasonable cause for the failure to report.
The determination of whether a failure to disclose a specified
foreign financial asset on Form 8938 was due to reasonable cause and
not due to willful neglect is made on a case-by-case basis, taking into
account all pertinent facts and circumstances. For this purpose, the
fact that a foreign jurisdiction would impose a civil or criminal
penalty on the specified person (or any other person) for disclosing
the required information is not reasonable cause.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in Executive Order 12866.
Therefore, a regulatory assessment is not required. It also has been
determined that section 553(b) of the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these regulations. For the
applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6),
please refer to the Special Analyses section of the preamble to the
cross-referenced notice of proposed rulemaking published in the
Proposed Rules section in this issue of the Federal Register. Pursuant
to section 7805(f) of the Internal Revenue Code, these regulations have
been submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on their impact on small business.
Drafting Information
The principal author of these regulations is Joseph S. Henderson,
Office of Associate Chief Counsel (International). However, other
personnel from the Internal Revenue Service and the Treasury Department
participated in the development of the regulations.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Amendments to the Regulations
Accordingly, 26 CFR part 1 is amended as follows:
PART 1---INCOME TAXES
0
Paragraph 1. The authority citation for part 1 is amended by adding
entries in numerical order to read as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.6038D-0T also issued under 26 U.S.C. 6038D.
Section 1.6038D-1T also issued under 26 U.S.C. 6038D.
Section 1.6038D-2T also issued under 26 U.S.C. 6038D.
Section 1.6038D-3T also issued under 26 U.S.C. 6038D.
[[Page 78560]]
Section 1.6038D-4T also issued under 26 U.S.C. 6038D.
Section 1.6038D-5T also issued under 26 U.S.C. 6038D.
Section 1.6038D-7T also issued under 26 U.S.C. 6038D.
Section 1.6038D-8T also issued under 26 U.S.C. 6038D.* * *
0
Par. 2. Section 1.6038D-0T is added to read as follows:
Sec. 1.6038D-0T Outline of regulation provisions (temporary).
This section lists the table of contents for Sec. Sec. 1.6038D-1T
through 1.6038D-8T.
Sec. 1.6038D-1T Reporting with respect to specified foreign financial
assets, definition of terms (temporary).
(a) In general.
(1) Specified person.
(2) Specified individual.
(3) Resident alien.
(4) Bona fide resident of a U.S. possession.
(5) U.S. possession.
(6) Specified foreign financial asset.
(7) Financial account.
(8) Financial institution.
(9) Foreign financial institution.
(10) Foreign entity.
(11) Annual return.
(12) Specified domestic entity. [Reserved]
(b) Effective/applicability dates.
(c) Expiration date.
Sec. 1.6038D-2T Requirement to report specified foreign financial
assets (temporary).
(a) Reporting requirement.
(1) In general.
(2) Special rule for married specified individuals filing a joint
annual return.
(3) Special rule for certain specified individuals living abroad.
(4) Special rule for qualified individuals filing a joint annual
return.
(5) Assets with no positive value.
(6) Excepted assets.
(7) Form 8938 filed with annual return.
(i) General rule.
(ii) Consolidated returns.
(8) Reporting required regardless of tax result.
(9) Reporting period.
(10) Successor forms.
(b) Interest in a specified foreign financial asset.
(1) In general.
(2) Special rule for parent making an election under section
1(g)(7).
(3) Entities.
(c) Special rules for joint interests.
(1) Aggregate value of assets.
(i) Specified persons.
(ii) Married specified individuals.
(2) Annual return filed by married specified individual.
(i) Joint annual return.
(ii) Separate annual return.
(d) Example.
(1) Facts.
(2) Filing requirement.
(i) Married specified individuals filing separate annual returns.
(ii) Married specified individuals filing a joint annual return.
(e) Effective/applicability dates.
(f) Expiration date.
Sec. 1.6038D-3T Specified foreign financial assets (temporary).
(a) Financial accounts.
(1) In general.
(2) Financial account in a U.S. possession.
(3) Excepted financial accounts.
(i) Accounts maintained by U.S. payors.
(ii) Mark-to-market election under section 475.
(b) Other specified foreign financial assets.
(1) In general.
(2) Mark-to-market election under section 475.
(3) Held for investment.
(4)Trade-or-business test.
(5) Direct relationship between holding an asset and a trade or
business.
(i) In general.
(ii) Presumption of direct relationship.
(c) Special rule for interests in foreign trusts and foreign
estates.
(d) Examples.
(e) Effective/applicability dates.
(f) Expiration date.
Sec. 1.6038D-4T Information required to be reported (temporary).
(a) Required information.
(b) Effective/applicability dates.
(c) Expiration date.
Sec. 1.6038D-5T Valuation guidelines (temporary).
(a) Fair market value.
(b) Valuation of assets.
(1) Maximum value.
(2) U.S. dollars.
(3) Asset with no positive value.
(c) Foreign currency conversion.
(1) In general.
(2) Other publicly available exchange rate.
(3) Currency exchange rate.
(4) Determination date.
(d) Financial accounts.
(e) Asset held in a financial account.
(f) Other specified foreign financial assets.
(1) General rule.
(2) Interests in trusts that are specified foreign financial
assets.
(i) Maximum value.
(ii) Reporting threshold.
(3) Interests in estates, pension plans, and deferred compensation
plans.
(i) Maximum value.
(ii) Reporting threshold.
(g) Effective/applicability dates.
(h) Expiration date.
Sec. 1.6038D-6T Specified domestic entities (temporary). [Reserved]
Sec. 1.6038D-7T Exceptions from the reporting of certain assets under
Section 6038D (temporary).
(a) Elimination of duplicative reporting of assets.
(1) In general.
(2) Foreign grantor trusts.
(b) Owner of certain trusts.
(c) Bona fide resident of a U.S. possession.
(d) Effective/applicability dates.
(e) Expiration date.
Sec. 1.6038D-8T Penalties for failure to disclose (temporary).
(a) In general.
(b) Married specified individuals filing a joint annual return.
(c) Increase in penalty.
(d) Presumption of aggregate value.
(e) Reasonable cause exception.
(1) In general.
(2) Affirmative showing required.
(3) Facts and circumstances taken into account.
(f) Penalties for underpayments attributable to undisclosed foreign
financial assets.
(1) Accuracy related penalty.
(2) Criminal penalties.
(g) Effective/applicability dates.
(h) Expiration date.
0
Par. 3. Section 1.6038D-1T is added to read as follows:
Sec. 1.6038D-1T Reporting with respect to specified foreign financial
assets, definition of terms (temporary).
(a) In general. The following definitions apply for purposes of
section 6038D and the regulations--
(1) Specified person. The term specified person means a specified
individual or a specified domestic entity.
(2) Specified individual. The term specified individual means an
individual who is a--
(i) U.S. citizen;
(ii) Resident alien of the United States for any portion of the
taxable year;
(iii) Nonresident alien for whom an election under section 6013(g)
or (h) is in effect; or
(iv) Nonresident alien who is a bona fide resident of Puerto Rico
or a section 931 possession (as defined in Sec. 1.931-1(c)(1)).
(3) Resident alien. The term resident alien has the meaning set
forth in section 7701(b) and Sec. Sec. 301.7701(b)-1 through
301.7701(b)-9 of this chapter.
[[Page 78561]]
(4) Bona fide resident of a U.S. possession. The term bona fide
resident of a U.S. possession means an individual who is a ``bona fide
resident'' under section 937(a) and Sec. 1.937-1.
(5) U.S. possession. The term U.S. possession means American Samoa,
Guam, the Northern Mariana Islands, Puerto Rico, or the U.S. Virgin
Islands.
(6) Specified foreign financial asset. The term specified foreign
financial asset has the meaning set forth in Sec. 1.6038D-3T.
(7) Financial account. The term financial account has the meaning
set forth in section 1471(d)(2) and the regulations.
(8) Financial institution. The term financial institution has the
meaning set forth in section 1471(d)(5) and the regulations.
(9) Foreign financial institution. The term foreign financial
institution has the meaning set forth in section 1471(d)(4) and the
regulations.
(10) Foreign entity. The term foreign entity has the meaning set
forth in section 1473(5) and the regulations.
(11) Annual return. The term annual return means an annual federal
income tax return of a specified individual or an annual federal income
tax return or information return of a specified domestic entity filed
with the Internal Revenue Service under section 876, 6011, 6012, 6013,
6031, or 6037, and the regulations.
(12) Specified domestic entity.--[Reserved].
(b) Effective/applicability dates. This section applies to taxable
years ending after December 19, 2011. Taxpayers may elect to apply the
rules of this section to taxable years ending prior to December 19,
2011.
(c) Expiration date. The applicability of this section expires
December 12, 2014.
0
Par. 4. Section 1.6038D-2T is added to read as follows:
Sec. 1.6038D-2T Requirement to report specified foreign financial
assets (temporary).
(a) Reporting requirement--(1) In general. Except as otherwise
provided, a specified person that has any interest in a specified
foreign financial asset during the taxable year must attach Form 8938,
``Statement of Specified Foreign Financial Assets,'' to that specified
person's annual return for the taxable year to report the information
required by section 6038D and Sec. 1.6038D-4T if the aggregate value
of all such assets exceeds--
(i) $50,000 on the last day of the taxable year; or
(ii) $75,000 at any time during the taxable year.
(2) Special rule for married specified individuals filing a joint
annual return. Except as provided in paragraph (a)(1)(4) of this
section, married specified individuals that file a joint annual return
for the taxable year must attach a single Form 8938 to their joint
annual return to report the information required by section 6038D and
Sec. 1.6038D-4T if the aggregate value of all of the specified foreign
financial assets in which either married specified individual has an
interest exceeds--
(i) $100,000 on the last day of the taxable year; or
(ii) $150,000 at any time during the taxable year.
(3) Special rule for certain specified individuals living abroad.
Except as provided in paragraph (a)(1)(4) of this section, a specified
individual who is a qualified individual under section 911(d)(1) for
the taxable year is required to attach a Form 8938 to the specified
individual's annual return and report the information required by
section 6038D and Sec. 1.6038D-4T if the aggregate value of the
specified foreign financial assets in which the specified individual
has an interest exceeds--
(i) $200,000 on the last day of the taxable year; or
(ii) $300,000 at any time during the taxable year.
(4) Special rule for qualified individuals filing a joint annual
return. A qualified individual under section 911(d)(1) and the
qualified individual's spouse who file a joint annual return must
attach Form 8938 to their joint annual return to report the information
required by section 6038D and Sec. 1.6038D-4T if the aggregate value
of all of the specified foreign financial assets in which either
married individual has an interest exceeds--
(i) $400,000 on the last day of the taxable year; or
(ii) $600,000 at any time during the taxable year.
(5) Assets with no positive value. A specified foreign financial
asset is subject to reporting even if the specified foreign financial
asset does not have a positive value. See Sec. 1.6038D-5T(b) for
reporting the maximum value of a specified foreign financial asset,
including a specified foreign financial asset that does not have a
positive value during the taxable year.
(6) Excepted assets. The value of any specified foreign financial
asset in which a specified individual has an interest and that is
excluded from reporting on Form 8938 pursuant to Sec. 1.6038D-7T(a) is
included for purposes of determining the aggregate value of specified
foreign financial assets. The value of any specified foreign financial
asset in which a specified individual has an interest and that is
excluded from reporting under Sec. 1.6038D-7T(b) or (c) is excluded
for purposes of determining the aggregate value of specified foreign
financial assets.
(7) Form 8938 filed with annual return--(i) General rule. A
specified person, including a specified individual who is a bona fide
resident of a U.S. possession, is not required to file Form 8938 with
respect to a taxable year if the specified person is not required to
file an annual return with the Internal Revenue Service with respect to
such taxable year.
(ii) Consolidated returns. If a specified domestic entity is a
member of an affiliated group of corporations that files a consolidated
income tax return, the Form 8938 of the specified domestic entity must
be filed with the affiliated group's annual return.
(8) Reporting required regardless of tax result. The Form 8938
required by section 6038D and this section must be furnished by a
specified person even if none of the specified foreign financial assets
that must be reported affect the specified person's tax liability under
the Internal Revenue Code for the taxable year.
(9) Reporting period. The reporting period covered by Form 8938 is
the specified person's taxable year, except the reporting period for a
specified person who is a specified individual for less than an entire
taxable year is the portion of the taxable year that the specified
person is a specified individual.
(10) Successor forms. References to Form 8938 include any successor
form.
(b) Interest in a specified foreign financial asset--(1) In
general. A specified person has an interest in a specified foreign
financial asset if any income, gains, losses, deductions, credits,
gross proceeds, or distributions attributable to the holding or
disposition of the specified foreign financial asset are or would be
required to be reported, included, or otherwise reflected by the
specified person on an annual return. A specified person has an
interest in a specified foreign financial asset even if no income,
gains, losses, deductions, credits, gross proceeds, or distributions
are attributable to the holding or disposition of the specified foreign
financial asset for the taxable year.
(2) Special rule for parent making election under section 1(g)(7).
A parent that makes an election under section 1(g)(7) to include
certain unearned income of a child in the parent's gross income has an
interest in any specified foreign financial asset held by the child
[[Page 78562]]
for the purposes of section 6038D and the regulations.
(3) Entities. Except as provided in this paragraph, a specified
person is not treated as having an interest in any specified foreign
financial assets held by a corporation, partnership, trust, or estate
solely as a result of the specified person's status as a shareholder,
partner, or beneficiary of such entity. A specified person that is
treated as the owner of a trust or any portion of a trust under
sections 671 through 679, other than a domestic liquidating trust under
Sec. 301.7701-4(d) of this chapter created pursuant to a court order
issued in a bankruptcy under Chapter 7 (11 U.S.C. 701 et seq.) or a
confirmed plan under Chapter 11 (11 U.S.C. 1101 et seq.) of the
Bankruptcy Code, or a domestic widely held fixed investment trust under
Sec. 1.671-5, is treated as having an interest in any specified
foreign financial assets held by the trust or the portion of the trust.
See Sec. 1.6038D-3T(c) to determine whether an interest in a foreign
trust or an interest in a foreign estate is a specified foreign
financial asset. See Sec. 1.6038D-5T(g) for rules to determine the
maximum value of an interest in a foreign trust or estate.
(c) Special rules for joint interests--(1) Aggregate value of
assets--(i) Specified persons. Except in the case of a specified person
described in paragraph (c)(1)(ii) of this section, each specified
person that is a joint owner of a specified foreign financial asset
must include the entire value of the specified foreign financial asset
(and not the value of the specified person's interest) for purposes of
determining whether the aggregate value of the specified person's
specified foreign financial assets exceeds the reporting thresholds set
forth in Sec. 1.6038D-2T(a).
(ii) Married specified individuals. Married specified individuals
who file a joint annual return must include the value of a specified
foreign financial asset that they jointly own or in which they have an
interest under paragraph (b)(2) of this section only once in
determining whether the aggregate value of all of the specified foreign
financial assets in which either married specified individual has an
interest exceeds the reporting thresholds set forth in Sec. 1.6038D-
2T(a). If a married specified individual files a separate annual return
and his or her spouse is a specified individual, the married specified
individual includes one-half of the value of a specified foreign
financial asset that the married specified individual jointly owns with
his or her spouse in determining whether the married specified
individual has an interest in specified foreign financial assets the
aggregate value of which exceeds the reporting thresholds set forth in
Sec. 1.6038D-2T(a).
(2) Annual return filed by a married specified individual--(i)
Joint annual return. Married specified individuals that file a joint
annual return must file a single Form 8938 to fulfill their reporting
requirements under section 6038D and Sec. 1.6038D-2T(a). The single
Form 8938 must report all of the specified foreign financial assets in
which either married specified individual has an interest. If the
married specified individuals jointly own a specified foreign financial
asset or if they have an interest in a specified foreign financial
asset under paragraph (b)(2) of this section, the asset must be
reported only once on the single Form 8938 filed for the taxable year.
(ii) Separate annual return. A married specified individual who
files a separate annual return for the taxable year must fulfill the
reporting requirements under section 6038D and Sec. 1.6038D-2T(a) by
filing a separate Form 8938 that reports all of the specified foreign
financial assets in which the married specified individual has an
interest, including assets jointly owned with the married specified
individual's spouse.
(d) Example. The following example illustrates the application of
paragraph (c) of this section:
Example. (1) Facts. Two married specified individuals, H and W,
jointly own a specified foreign financial asset with a value of
$90,000 at all times during the taxable year. H separately has an
interest in a specified foreign financial asset with a value of
$10,000 at all times during the taxable year. W separately has an
interest in a specified foreign financial asset with a value of
$1,000 at all times during the taxable year.
(2) Filing requirement--(i) Married specified individuals filing
a separate annual return. If H and W file separate annual returns,
the aggregate value of the specified foreign financial assets in
which H has an interest at the end of the taxable year is $55,000,
comprising one-half of the value of the jointly owned asset,
$45,000, and the value of H's separately owned specified foreign
financial asset, $10,000. The aggregate value of the specified
foreign financial assets in which W has an interest at the end of
the taxable year is $46,000, comprising one-half of the value of the
jointly owned asset, $45,000, and the value of W's separately owned
specified foreign financial asset, $1,000. H must file Form 8938
with his annual return for the taxable year because the aggregate
value of the specified foreign financial assets in which H has an
interest exceeds the applicable reporting threshold ($50,000) set
forth in Sec. 1.6038D-2T(a)(1). H must report the maximum value of
the entire jointly owned asset, $90,000, and the maximum value of
the separately owned asset, $10,000. See Sec. 1.6038D-4T(b)
regarding the maximum value of a jointly owned specified foreign
financial asset to be reported by a specified person, including a
married specified individual, that is a joint owner of an asset. The
aggregate value of the specified foreign financial assets in which W
has an interest, $46,000, does not exceed the applicable reporting
threshold forth in Sec. 1.6038D-2T(a)(1). W is not required to file
Form 8938 with her separate annual return.
(ii) Married specified individuals filing a joint annual return.
If H and W file a joint annual return, they must file a single Form
8938 with their joint annual return for the taxable year because the
aggregate value of all of the specified foreign financial assets in
which either H and W have an interest ($90,000 (included only once),
$10,000, and $1000, or $101,000) exceeds the applicable reporting
threshold ($100,000) set forth in Sec. 1.6038D-2T(a)(2). The single
Form 8938 must report the maximum value of the jointly owned
specified foreign financial asset, $90,000, and the maximum value of
the specified foreign financial assets separately owned by H and W,
$10,000 and $1,000, respectively.
(e) Effective/applicability dates. This section applies to taxable
years ending after December 19, 2011. Taxpayers may elect to apply the
rules of this section to taxable years ending prior to December 19,
2011.
(f) Expiration date. The applicability of this section expires
December 12, 2014.
0
Par. 5. Section 1.6038D-3T is added to read as follows:
Sec. 1.6038D-3T Specified foreign financial assets (temporary).
(a) Financial accounts--(1) In general. Except as otherwise
provided in this section, a specified foreign financial asset includes
any financial account maintained by a foreign financial institution. An
asset held in a financial account maintained by a foreign financial
institution is not required to be separately reported on Form 8938,
``Statement of Specified Foreign Financial Assets.''
(2) Financial account in a U.S. possession. A specified foreign
financial asset includes a financial account maintained by a financial
institution that is organized under the laws of a U.S. possession.
(3) Excepted financial accounts-- (i) Accounts maintained by U.S.
payors. A financial account maintained by a U.S. payor as defined in
Sec. 1.6049-5(c)(5)(i) (including assets held in such an account) is
not a specified foreign financial asset for purposes of section 6038D
and the regulations.
(ii) Mark-to-market election under section 475. A financial account
is not a specified foreign financial asset if the rules of section
475(a) apply to all of the holdings in the account or an election
[[Page 78563]]
under section 475(e) or (f) is made with respect to all of the holdings
in the account.
(b) Other specified foreign financial assets--(1) In general.
Except as otherwise provided in this section, a specified foreign
financial asset includes any of the following assets that are held for
investment and not held in an account maintained by a financial
institution --
(i) Stock or securities issued by a person other than a United
States person;
(ii) A financial instrument or contract that has an issuer or
counterparty which is other than a United States person; and
(iii) An interest in a foreign entity.
(2) Mark-to-market election under section 475. An asset is not a
specified foreign financial asset if the rules of section 475(a) apply
to the asset or an election under section 475(e) or (f) is made with
respect to the asset.
(3) Held for investment. An asset is held for investment for
purposes of section 6038D and the regulations if that asset is not used
in, or held for use in, the conduct of a trade or business of a
specified person.
(4) Trade-or-business test. For purposes of section 6038D and the
regulations, an asset is used in, or held for use in, the conduct of a
trade or business and not held for investment if the asset is--
(i) Held for the principal purpose of promoting the present conduct
of a trade or business;
(ii) Acquired and held in the ordinary course of a trade or
business, as, for example, in the case of an account or note receivable
arising from that trade or business; or
(iii) Otherwise held in a direct relationship to the trade or
business as determined under paragraph (b)(5) of this section.
(5) Direct relationship between holding an asset and a trade or
business--(i) In general. In determining whether an asset is held in a
direct relationship to the conduct of a trade or business by a
specified person, principal consideration will be given to whether the
asset is needed in the trade or business of the specified person. An
asset shall be considered needed in a trade or business, for this
purpose, only if the asset is held to meet the present needs of that
trade or business and not its anticipated future needs. An asset shall
be considered as needed in the trade or business if, for example, the
asset is held to meet the operating expenses of the trade or business.
Conversely, an asset shall be considered as not needed in the trade or
business if, for example, the asset is held for the purpose of
providing for future diversification into a new trade or business,
future plant replacement, or future business contingencies. Stock is
never considered used or held for use in a trade or business for
purposes of applying this test.
(ii) Presumption of direct relationship. An asset will be treated
as held in a direct relationship to the conduct of a trade or business
of a specified person if--
(A) The asset was acquired with funds generated by the trade or
business of the specified person or the affiliated group of the
specified person, if any;
(B) The income from the asset is retained or reinvested in the
trade or business; and
(C) Personnel who are actively involved in the conduct of the trade
or business exercise significant management and control over the
investment of such asset.
(c) Special rule for interests in foreign trusts and foreign
estates. An interest in a foreign trust or a foreign estate is not a
specified foreign financial asset of a specified person unless the
person knows or has reason to know based on readily accessible
information of the interest. Receipt of a distribution from the foreign
trust or foreign estate constitutes actual knowledge for this purpose.
(d) Examples. Examples of assets other than financial accounts that
may be considered other specified foreign financial assets include, but
are not limited to--
(1) Stock issued by a foreign corporation;
(2) A capital or profits interest in a foreign partnership;
(3) A note, bond, debenture, or other form of indebtedness issued
by a foreign person;
(4) An interest in a foreign trust;
(5) An interest rate swap, currency swap, basis swap, interest rate
cap, interest rate floor, commodity swap, equity swap, equity index
swap, credit default swap, or similar agreement with a foreign
counterparty; and,
(6) Any option or other derivative instrument with respect to any
of the items listed as examples in this paragraph or with respect to
any currency or commodity that is entered into with a foreign
counterparty or issuer.
(e) Effective/applicability dates. This section applies to taxable
years ending after December 19, 2011. Taxpayers may elect to apply the
rules of this section to taxable years ending prior to December 19,
2011.
(f) Expiration date. The applicability of this section expires
December 12, 2014.
0
Par. 6. Section 1.6038D-4T is added to read as follows:
Sec. 1.6038D-4T Information required to be reported (temporary).
(a) Required information. The following information must be
reported on Form 8938, ``Statement of Specified Foreign Financial
Assets,'' with respect to each specified foreign financial asset:
(1) In the case of a financial account maintained by a foreign
financial institution, the name and address of the foreign financial
institution and the account number of the account;
(2) In the case of stock or a security, the name and address of the
issuer, and information that identifies the class or issue of which the
stock or security is a part;
(3) In the case of a financial instrument or contract, information
that identifies the financial instrument or contract, including the
names and addresses of all issuers and counterparties;
(4) In the case of an interest in a foreign entity, information
that identifies the interest, including the name and address of the
entity;
(5) The maximum value of the specified foreign financial asset
during the portion of the taxable year in which the specified person
has an interest in the asset;
(6) In the case of a financial account that is a depository or
custodial account under section 1471(d)(2), whether the account was
opened or closed during the taxable year;
(7) The date, if any, on which the specified foreign financial
asset, other than a financial account that is a depository or custodial
account under section 1471(d)(2), was either acquired or disposed of
(or both) during the taxable year;
(8) The amount of any income, gain, loss, deduction, or credit
recognized for the taxable year with respect to the reported specified
foreign financial asset, and the schedule, form, or return filed with
the Internal Revenue Service on which the income, gain, loss,
deduction, or credit, if any, is reported or included by the specified
person;
(9) The foreign currency exchange rate and, if the source of such
rate is other than as described in Sec. 1.6038D-5T(d)(1), the source
of the rate used to determine the specified foreign financial asset's
U.S. dollar value, including maximum value; and
(10) For any specified foreign financial asset excepted from
reporting on Form 8938 under Sec. 1.6038D-7T(a),
[[Page 78564]]
the specified person must report the number of Forms 3520, ``Annual
Return To Report Transactions With Foreign Trusts and Receipt of
Certain Foreign Gifts,'' Forms 3520-A, ``Annual Information Return of
Foreign Trust With a U.S. Owner,'' Forms 5471, ``Information Return of
U.S. Persons With Respect To Certain Foreign Corporations,'' Forms
8621, ``Return by a Shareholder of a Passive Foreign Investment Company
or a Qualified Electing Fund,'' Forms 8865, ``Return of U.S. Persons
With Respect To Certain Foreign Partnerships,'' Forms 8891, ``U.S.
Information Return for Beneficiaries of Certain Canadian Registered
Retirement Plans,'' or such other form under Title 26 of the United
States Code identified by the Secretary under Sec. 1.6038D-7T(a),
timely filed with the Internal Revenue Service on which excepted
foreign financial assets are reported or reflected for the taxable
year.
(b) Effective/applicability dates. This section applies to taxable
years ending after December 19, 2011. Taxpayers may elect to apply the
rules of this section to taxable years ending prior to December 19,
2011.
(c) Expiration date. The applicability of this section expires
December 12, 2014.
0
Par. 7. Section 1.6038D-5T is added to read as follows:
Sec. 1.6038D-5T Valuation guidelines (temporary).
(a) Fair market value. Except as provided in paragraphs (c) and (e)
of this section, the value of a specified foreign financial asset for
purposes of determining the aggregate value of specified foreign
financial assets held by a specified person and the maximum value of a
specified foreign financial asset required to be reported on Form 8938,
``Statement of Specified Foreign Financial Assets,'' is the asset's
fair market value.
(b) Valuation of assets--(1) Maximum Value. Except as provided in
this section, the maximum value of a specified foreign financial asset
means a reasonable estimate of the asset's maximum fair market value
during the taxable year.
(2) U.S. dollars. For purpose of determining the aggregate value of
specified foreign financial assets in which a specified person has an
interest and determining the maximum value of a specified foreign
financial asset, the value of a specified foreign financial asset
denominated in a foreign currency during the taxable year must be
determined in the foreign currency and then converted to U.S. dollars.
(3) Asset with no positive value. If the maximum fair market value
of a specified foreign financial asset is less than zero, its value is
treated as zero for purposes of determining the aggregate value of
specified foreign financial assets in which a specified person has an
interest and determining the maximum value of the specified foreign
financial asset,
(c) Foreign currency conversion--(1) In general. Except as provided
in paragraph (d)(2) of this section, the U.S. Treasury Department's
Financial Management Service foreign currency exchange rate is to be
used to convert the value of a specified foreign financial asset into
U.S. dollars for purposes of determining the aggregate value of
specified foreign financial assets in which a specified person has an
interest and determining the maximum value of a specified foreign
financial asset,
(2) Other publicly available exchange rate. If no U.S. Treasury
Financial Management Service foreign currency exchange rate is
available for a particular currency, another publicly available foreign
currency exchange rate may be used to convert the value of a specified
foreign financial asset into U.S. dollars. In such case, the source of
the foreign currency exchange rate must be disclosed on Form 8938.
(3) Currency exchange rate. In converting the currency of a foreign
country, the foreign currency exchange rate applicable for converting
the currency into U.S. dollars (that is, to purchase U.S. dollars) must
be used.
(4) Determination date. In converting the currency of a foreign
country into U.S. dollars for purposes of determining the maximum value
of a specified foreign financial asset and determining the aggregate
value of specified foreign financial assets in which a specified person
has an interest, the applicable foreign currency exchange rate is the
rate on the last day of the taxable year of the specified person, even
if the specified person sold or otherwise disposed of a specified
foreign financial asset prior to the last day of such year.
(d) Financial accounts. A specified person may rely upon periodic
account statements provided at least annually to determine a financial
account's maximum value unless the specified person has actual
knowledge or reason to know based on readily accessible information
that the statements do not reflect a reasonable estimate of the maximum
account value during the taxable year.
(e) Asset held in a financial account. The value of an asset held
in a financial account maintained by a foreign financial institution is
included in determining the value of that financial account for
purposes of Sec. 1.6038D-5T(a).
(f) Other specified foreign financial assets--(1) General rule.
Except as provided in paragraphs (f)(2) and (f)(3) of this section, for
specified foreign financial assets that are not held in a financial
account maintained by a foreign financial institution, a specified
person may use the value of the asset as of the last day of the taxable
year on which the specified person has an interest in the asset as the
maximum value of that asset, unless the specified person has actual
knowledge or reason to know based on readily accessible information
that the value does not reflect a reasonable estimate of the maximum
value of the asset.
(2) Interests in trusts that are specified foreign financial
assets--
(i) Maximum value. If a specified person is a beneficiary of a
foreign trust, the maximum value of the specified person's interest in
the trust is the sum of--
(A) the fair market value, determined as of the last day of the
taxable year, of all of the currency or other property distributed from
the foreign trust during the taxable year to the specified person as a
beneficiary; and
(B) the value as of the last day of the taxable year of the
specified person's right as a beneficiary to receive mandatory
distributions from the foreign trust as determined under section 7520.
(ii) Reporting threshold. For purposes of determining the aggregate
value of specified foreign financial assets in which a specified person
has an interest, if the specified person does not know or have reason
to know based on readily accessible information the fair market value
of the person's interest in a foreign trust during the taxable year,
the value to be included in determining the aggregate value of the
specified foreign financial assets is the maximum value of the
specified person's interest in the foreign trust under paragraph
(f)(2)(i) of this section.
(3) Interests in estates, pension plans, and deferred compensation
plans.
(i) Maximum value. The maximum value of a specified person's
interest in a foreign estate, foreign pension plan, or a foreign
deferred compensation plan is the fair market value, determined as of
the last day of the taxable year, of the specified person's beneficial
interest in the assets of the foreign estate, foreign pension plan, or
foreign deferred compensation plan. If the specified person does not
know or have reason to know based on readily accessible information
such fair market value, the
[[Page 78565]]
maximum value to be reported is the fair market value, determined as of
the last day of the taxable year, of the currency and other property
distributed during the taxable year to the specified person as a
beneficiary or participant.
(ii) Reporting threshold. For purposes of determining the aggregate
value of specified foreign financial assets in which a specified person
has an interest, if the specified person does not know or have reason
to know based on readily accessible information the fair market value
of the person's interest in a foreign estate, foreign pension plan, or
foreign deferred compensation plan during the taxable year, the value
to be included in determining the aggregate value of the specified
foreign financial assets is the fair market value, determined as of the
last day of the taxable year, of the currency and other property
distributed during the taxable year to the specified person as a
beneficiary or participant.
(g) Effective/applicability dates. This section applies to taxable
years ending after December 19, 2011. Taxpayers may elect to apply the
rules of this section to taxable years ending prior to December 19,
2011.
(h) Expiration date. The applicability of this section expires
December 12, 2014.
0
Par. 8. Section 1.6038D-6T is added to read as follows:
Sec. 1.6038D-6T Specified domestic entities (temporary). [Reserved]
0
Par. 9. Section 1.6038D-7T is added to read as follows:
Sec. 1.6038D-7T Exceptions from the reporting of certain assets under
Section 6038D (temporary).
(a) Elimination of duplicative reporting of assets--(1) In general.
A specified person is not required to report a specified foreign
financial asset on Form 8938, ``Statement of Specified Foreign
Financial Assets,'' if the specified person--
(i) Reports the asset on at least one of the following forms timely
filed with the Internal Revenue Service for the taxable year--
(A) Form 3520, ``Annual Return To Report Transactions With Foreign
Trusts and Receipt of Certain Foreign Gifts'' (in the case of a
specified person who is the beneficiary of a foreign trust);
(B) Form 5471, ``Information Return of U.S. Persons With Respect to
Certain Foreign Corporations'';
(C) Form 8621, ``Return by a Shareholder of a Passive Foreign
Investment Company or a Qualified Electing Fund'';
(D) Form 8865, ``Return of U.S. Persons With Respect to Certain
Foreign Partnerships''; or
(E) Form 8891, ``U.S. Information Return for Beneficiaries of
Certain Canadian Registered Retirement Plans''; or
(F) Any other form under Title 26 of the United States Code timely
filed with the Internal Revenue Service and identified for this purpose
by the Secretary in regulations or other guidance; and
(ii) Reports on Form 8938 the filing of the form on which the asset
is reported.
(2) Foreign grantor trusts. A specified person that is treated as
an owner of a foreign trust or any portion of a foreign trust under
sections 671 through 679 is not required to report any specified
foreign financial assets held by the foreign trust on Form 8938,
provided--
(i) The specified person reports the trust on a Form 3520 timely
filed with the Internal Revenue Service for the taxable year;
(ii) The trust timely files Form 3520-A, ``Annual Information
Return of Foreign Trust With a U.S. Owner,'' with the Internal Revenue
Service for the taxable year; and
(iii) The Form 8938 filed by the specified person for the taxable
year reports the filing of the Form 3520 and Form 3520-A.
(b) Owner of certain trusts. A specified person that is treated as
an owner of any portion of a domestic trust under sections 671 through
679 is not required to file Form 8938 to report any specified foreign
financial asset held by the trust if the trust is--
(1) A widely-held fixed investment trust under Sec. 1.671-5; or
(2) A liquidating trust within the meaning of Sec. 301.7701-4(d)
of this chapter that is created pursuant to a court order issued in a
bankruptcy under Chapter 7 (11 U.S.C. 701 et seq.) or a confirmed plan
under Chapter 11 (11 U.S.C. 1101 et seq.) of the Bankruptcy Code.
(c) Bona fide resident of a U.S. possession. A specified individual
who is a bona fide resident of a U.S. possession and who is required to
file Form 8938 with the Internal Revenue Service is not required to
report the following specified foreign financial assets:
(1) A financial account maintained by a financial institution
organized under the laws of the U.S. possession of which the specified
individual is a bona fide resident;
(2) A financial account maintained by a branch of a financial
institution not organized under the laws of the U.S. possession of
which the specified individual is a bona fide resident, if the branch
is subject to the same tax and information reporting requirements
applicable to a financial institution organized under the laws of the
U.S. possession;
(3) Stock or securities issued by an entity organized under the
laws of the U.S. possession of which the specified individual is a bona
fide resident;
(4) An interest in an entity organized under the laws of the U.S.
possession of which the specified individual is a bona fide resident;
and
(5) A financial instrument or contract held for investment,
provided each issuer or counterparty that is not a United States person
is--
(i) An entity organized under the laws of the U.S. possession of
which the specified individual is a bona fide resident; or
(ii) A bona fide resident of the U.S. possession of which the
specified individual is a bona fide resident.
(d) Effective/applicability dates. This section applies to taxable
years ending after December 19, 2011. Taxpayers may elect to apply the
rules of this section to taxable years ending prior to December 19,
2011.
(e) Expiration date. The applicability of this section expires
December 12, 2014.
0
Par. 10. Section 1.6038D-8T is added to read as follows:
Sec. 1.6038D-8T Penalties for failure to disclose (temporary).
(a) In general. If a specified person fails to file a Form 8938,
``Statement of Specified Foreign Financial Assets,'' that includes the
information required by section 6038D(c) and Sec. 1.6038D-4T with
respect to any taxable year at the time and in the manner described in
section 6038D(a) and Sec. 1.6038D-2T, a penalty of $10,000 will apply
to that specified person.
(b) Married specified individuals filing a joint annual return.
Married specified individuals who file a joint annual return and fail
to file a required Form 8938, ``Statement of Specified Foreign
Financial Assets,'' that includes the information required by section
6038D(c) and Sec. 1.6038D-4T with respect to any taxable year at the
time and in the manner described in section 6038D(a) and Sec. 1.6038D-
2T are subject to penalties under this section as if the married
specified individuals are a single specified person. The liability of
married specified individuals who file a joint annual return with
respect to any penalties under this section is joint and several.
(c) Increase in penalty. If any failure to comply with the
applicable reporting
[[Page 78566]]
requirement of section 6038D and the regulations continues for more
than 90 days after the day on which the Commissioner or his delegate
mails a notice of the failure to the specified person required to file
the Form 8938, the specified person is required to pay an additional
penalty of $10,000 for each 30-day period (or fraction thereof) during
which the failure continues after the 90-day period has expired. The
additional penalty imposed by section 6038D(d)(2) and this paragraph
(c) is limited to a maximum of $50,000 for each such failure.
(d) Presumption of aggregate value. For the purpose of assessing
penalties imposed under section 6038D(d), if the Commissioner or his
delegate determines that a specified person has an interest in one or
more specified foreign financial assets and the specified person does
not provide sufficient information to demonstrate the aggregate value
of the assets upon request by the Commissioner or his delegate, then
the aggregate value of the assets is treated as being in excess of the
applicable reporting threshold set forth in Sec. 1.6038D-2T(a).
(e) Reasonable cause exception--(1) In general. If the failure to
report the information required in section 6038D(c) and Sec. 1.6038D-
4T is shown to be due to reasonable cause and not due to willful
neglect, no penalty will be imposed under section 6038D(d) or this
section.
(2) Affirmative showing required. In order to show that the failure
to disclose is due to reasonable cause and not due to willful neglect
for purposes of section 6038D(g) and this section, the specified person
must make an affirmative showing of all the facts alleged as reasonable
cause for the failure to disclose.
(3) Facts and circumstances taken into account. The determination
of whether a failure to disclose a specified foreign financial asset on
Form 8938 was due to reasonable cause and not due to willful neglect is
made on a case-by-case basis, taking into account all pertinent facts
and circumstances. The fact that a foreign jurisdiction would impose a
civil or criminal penalty on the specified person (or any other person)
for disclosing the required information is not reasonable cause.
(f) Penalties for underpayments attributable to undisclosed foreign
financial assets--(1) Accuracy-related penalty. For application of the
accuracy-related penalty in the case of any portion of an underpayment
attributable to any undisclosed foreign financial asset understatement,
see section 6662(j).
(2) Criminal penalties. In addition to other penalties, failure to
comply with the reporting requirements of section 6038D and the
regulations, or any underpayment related to such failure, may result in
criminal penalties under sections 7201, 7203, 7206, et seq., or other
provisions of Federal law.
(g) Effective/applicability dates. This section applies to taxable
years ending after December 19, 2011. Taxpayers may elect to apply the
rules of this section to taxable years ending prior to December 19,
2011.
(h) Expiration date. The applicability of this section expires
December 12, 2014.
Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
Approved: November 30, 2011.
Emily S. McMahon,
Acting Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2011-32263 Filed 12-14-11; 4:15 pm]
BILLING CODE 4830-01-P